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America’s judges are getting harder to shock. That’s a major conclusion of a National Law Journal survey of 100 jury awards of $1 million or more from a single year, 1997, that were reviewed by trial and appellate courts. Federal and state judges are accepting numbers that would have been rejected as excessive only a few years ago. The last such NLJ survey covered 100 verdicts from 1994. A multimillion-dollar award, especially one for punitive damages, was apt to have been reversed or cut dramatically. Large jury verdicts still face a significant risk of reversal or reduction. But the rate of outright reversal has fallen, and the bar has been raised considerably on what trial and appellate judges find offensive. Jury awards that “used to make you gag and choke are being upheld,” says defense counsel Frank Daily of Milwaukee’s Quarles & Brady. “It takes much more to shock the conscience of judges.” The trend is pronounced when it comes to punitives for injuries or death. In an asbestos case involving a single plaintiff, a Florida appellate court sustained $31 million in punitive damages in a verdict that drew only $1.75 million in compensatories. In South Carolina, a trial court sustained $250 million in punitives against Chrysler in a products liability case involving the death of a child. And in Louisiana, an appellate court sustained an $850 million punitive judgment against a railroad in a case in which no one claimed any permanent personal injury. The year 1997 was chosen so that nearly all the cases would have gone through at least the first stage of the appellate process. Among the 100 verdicts: � Twenty-one were set aside by trial judges or reversed by appellate courts. � Thirty-nine were reduced on post-trial motions or appeal. Four of these 39 were later reversed outright. � Large verdicts in the federal courts were less likely to be reversed than were verdicts in state courts, a turnaround from previous surveys. � Personal injury verdicts were the least likely to be reversed — only nine of 69 cases. After two of these reversals, the verdicts were reinstated; in five others, the defendants wound up settling. It wasn’t all good news for plaintiffs. More than half of the cases, 56 of them, were reversed or remitted or both. Many of the largest awards were erased completely, including a $101 million class action fraud verdict against General Dynamics Corp., a $222 million libel judgment against Dow Jones & Co. and a $346 million breach-of-contract award against Electec Corp., the predecessor to Entergy Enterprises Inc. Others were cut severely, including a conversion verdict against Chase Manhattan Corp., sliced from $151 million to less than $13 million, and the elimination of all but $1 million of a $100 million punitive award against Biomet Inc. and its subsidiaries in a breach-of-contract case. NOT A ‘POTTED PLANT’ The reaction to this judicial activism depends on which side of the courtroom the attorneys involved usually sit. Dennis Orr of the New York office of Chicago’s Mayer, Brown & Platt, who lost most of the $100 million Biomet award, says that the appellate court overstepped its proper role. “The 3rd Circuit essentially stepped in as if they were trying the case,” says Orr. “The court went too far.” “It’s unfortunate when the collective wisdom of a jury of 12 is replaced by the judgment of one,” says plaintiffs’ attorney John Howie of Dallas’ Howie & Sweeney, who saw two large verdicts cut back after trial — including a $60 million award trimmed to less than $20 million. Defense counsel like Daily say the trial and appellate judges were doing their duty as gatekeepers. Daily won a reversal of a $26.6 million verdict in an employment case. The U.S. Supreme Court decisions in Daubert and Kumho Tire “have had a spillover to the trial bench, not just on evidence, but to prevent excessive verdicts,” Daily says. “Motions after verdict are getting greater scrutiny.” There is a greater realization by trial judges that “a trial court is not just a potted plant,” he says. Still, the rate of outright reversals was down significantly. The NLJ has done two earlier studies — one in 1994 on 1990 verdicts and one in 1998 on verdicts from 1994. In the earlier one, 27 of the 100 cases had been reversed. In the second survey, the number of reversals rose to 32. This year’s survey found only 21 reversals, and two of these were later reinstated. Ten were remanded for retrial, and, ultimately, nine of them settled. In the past two surveys, the rule was that the larger the verdict, the more likely it was to be reversed. In 1990, seven of the 20 largest verdicts were reversed. In 1994, eight of the top 20 were tossed out. This time, only four of the 20 biggest verdicts were reversed. BUSINESS BATTLES Cases involving personal injury or death were most likely to survive post-trial motions and appeals, whatever the size of the award. But the amounts sustained on review were often substantial in disputes between businesses as well. In United International Holdings Inc.’s breach-of-contract claim against The Wharf (Holdings) Ltd., which drew a verdict of $67 million in compensatories and $58.5 million in punitives, the defendant appealed, charging, among other claims, that the punitives were excessive. “I thought in particular that the Supreme Court would be shocked by the amount of the award, considering the minor out-of-pocket loss suffered by the plaintiff,” says defense trial counsel William Jentes of Chicago’s Kirkland & Ellis. But the verdict was upheld as awarded. Most of the decline in reversals can be traced to federal courts. In the first survey, 42 percent of the federal verdicts were reversed; in the second survey, 34 percent were set aside. In the 1997 cases, only four of 27 federal cases, or 15 percent, were reversed. The difference in the reversal rate in the federal courts could be caused by the “Clinton effect” — the notion that Clinton-appointed judges to the federal courts would be more plaintiff-friendly than those appointed in the administrations of Ronald Reagan and the first George Bush. But the number of cases was too small to determine this. Moreover, Clinton appointees are not raving liberals, says Esteban Aguilar of Albuquerque, N.M.’s Aguilar Law Offices, who won a $27.27 million verdict against Ingersoll-Rand Corp. in a products liability case. The 10th U.S. Circuit Court of Appeals upheld the entire judgment, including $17.46 million in punitives. “Across the board, the federal judiciary is very conservative,” Aguilar says. Instead, what is happening, according to lawyers on both sides of the courtroom, is simply a general increase of the amount considered to be appropriate compensation. Just as the amounts of jury verdicts have risen, so have the amounts accepted by judges. “Over the last decade, the whole system has been hardened to larger verdicts,” says Daily. “I call this the dot-com effect. Because of the tobacco settlement and the repeated publicity about dot-coms, everybody’s perception is that if you have a company, you’ve got millions.” JUDGES READ NEWSPAPERS And not just jurors believe this, Daily says. “Judges are like the rest of us,” he says. “They read newspapers.” The years of an expanding economy have affected awards made and sustained, says defense attorney Malcolm Wheeler of Denver’s Wheeler Trigg & Kennedy. Even if the economy tanks, Wheeler says, the amounts of verdicts and sustained judgments may not decrease. “It’s a lot easier to go up than to go down,” he says. With the punitive awards, this inflation is only part of the equation, however. Tort reform measures in many states and the effect of Supreme Court decisions have changed the way plaintiffs’ attorneys plead and prove punitive damage claims. In Florida, for instance, the path to claiming, proving and keeping punitive damages is strewn with obstacles, says Christian D. Searcy of West Palm Beach, Fla.’s Searcy Denney Scarola Barnhart & Shipley, who won a $50 million punitive judgment against CSX Transportation Inc. in a wrongful death action over a train wreck. “By the time you’ve complied with all that punitive proof, you’re more likely to be upheld,” he says. In the wake of BMW v. Gore and other such decisions, punitive judgments everywhere are harder to win, but “the verdicts are more immune to reversal,” adds Wheeler. “You’ve got all these great instructions now on clear and convincing evidence,” he says. While the prospects for verdicts being upheld improved, 39 cases were still remitted by trial and appellate courts. Some cutbacks were minor. Others were substantial. Cole Portis of Montgomery, Ala.’s Beasley, Allen, Crow, Methvin, Portis & Miles won a $10.5 million products liability verdict, including $10 million in punitives. He says the justices who cut all the remaining punitives from the judgment on appeal “just made a mockery of the jury that heard the case.” In the case against Biomet, the trial court had cut the punitives to $50 million. Then the 3rd Circuit made a deeper cut, to $1 million. “There was no rational, factual basis to support the court’s changing the punitives to $1 million from $50 million,” Orr says. “We had evidence to support $100 million in harm.” The cuts left nearly $50 million in compensatories. With interest, the defense paid more than $64 million. But the loss of the punitives still has an effect on Orr. When the 3rd Circuit ruled, he says, “It broke my heart.”

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